Edp Renewables Sa U/Adr

Welcome, everyone. Thank you for joining EDPR's first of 2025 results conference call. We are pleased to have you with us today, our CEO, Miguel Esposandrade, and our CFO, Rui Teixeira. They will walk us through the key financial highlights from the period and share insights into the full year outlook. After the presentation, we'll open the floor for questions. You are welcome to submit them via the conference chat or ask them directly over the phone. Section is scheduled to last approximately 60 minutes. With that, I will now hand over to Miguel Sotomayor to begin the presentation.

Thank you, Miguel. Good afternoon, everyone. It's good to catch up with you before many of you head off to some well-deserved holidays. So I'd start off by moving to slide four and talking about the first half, key highlights and numbers. So I think the first half was marked by a really solid evolution of the underlying EBITDA net profits. We're also on track to deliver the two gigawatts of capacity that we'd committed to. And the asset rotation plan is also proceeding as expected. In fact, we just announced a couple of hours ago an asset rotation in Greece. So another one. And we expect a couple more over the next couple of days and weeks. And that's all aligned with our 2025 year-end targets. Overall, installed capacity grew to almost 20 gigawatts, up 18% year-on-year, so that's thanks to the net additions of 3 gigawatts. We got a 12% year-on-year increase in generation, so reaching over 21 terawatt hours. And here we've done a lot of work on our volume projections and modeling, and I think just increased confidence in the ability to estimate the projections. So I think we're feeling good about this. In terms of average selling price, it's standing at 55 euros per megawatt hour, down 9% year on year. That's mainly due to lower prices in Europe and South America, but then partially offset by stronger pricing in North America. One point I really wanted to highlight is the fact that our adjusted core OPEX per average megawatt an operation improved by 11% year to date, reflecting an ongoing focus on operational efficiency. So here you can see the economies of scale really beginning to kick in. The solar, the factory have obviously more megawatts and keeping the cost on a nominal basis really under strict control. On the financials, recurring EBITDA at around 960 million euros, so flat year-on-year. However, excluding asset rotation gains, the underlying EBITDA grew by around 20% year-on-year. Recurring net profit coming in at around 137 million, which includes... or 132 million excluding asset rotation gains, and that's an 80 million euro increase year on year. So strong operational results, good execution, good financial discipline, I think positioning us well to meet our 2025 objectives. So let's talk about some of our key markets and highlights on what's happened over the last couple of months. If we turn to slide five, let's talk about the U.S., So first we see robust demand outlook for power and renewals. I think this is undeniable. You'll see it everywhere. I mean, a lot has been written about it. And I mean, just to give you sort of a couple of data points, but it's projected around 70% increase in the US power demand by 2015. And the other thing, so apart from this increased demand that we expect over the next couple of years and even decades, we now have much more clarity on the market conditions following the one big, beautiful bill that's being approved by Congress and Senate and signed into law by President Trump. At the end of all of this process, we continue to see strong fundamentals to capitalize on the opportunities ahead. I think we continue to believe strongly that renewables remains the most competitive source of power and that it's the only technology that is really ready to connect at scale today. certainly over the next couple of years as well, to meet this demand. I'm sure we can then go into more debate about nuclear and coal and gas. But the truth is, as of today and over the next couple of years, renewables is really what can provide or supply a lot of power to this market. This market demand is coming through in pricing dynamics. We are seeing high demand for near-term connection projects and also for longer-term contracts with a trend towards increasing demand the appetite for 20-year contracts, so indicating market views on long-term energy pricing. In terms of prices, high prices on the back of this increased demand and lack of short-term, near-term supply. And just one data point, for example, here, we saw the PJM capacity auction prices be cleared at the cap of $329 per megawatt day for the 26-27 period, and that compares to $270 for the previous period, 25-26. On the bill, the one big, beautiful bill, it's brought clarity to the tax credit structure. I think most of you will be familiar with that. So now the new framework is in place. There's no change to the adders, no changes to the storage tax credits. We have coverage for tax credits until December 2027 without further start of construction or safe harbor limitations. And we are expecting some revised guidance on start of construction under the new law now in mid-August following the executive order from July 7th, but hopefully we'll be able to get some more information on that over the next couple of weeks. But all in all, we are well positioned in this landscape with 26 and 27 capacity, basically, or the ability to have this capacity secured under the bill and with existing safe harbor capacity. So we have about 1.5 gigawatts of solar and wind capacity under the old legislation as of December 2024, and that can be placed in service until December 2028. And then post-2028, we are currently working to secure additional safe harbor capacity, potentially all the way through to 2030. So clearly things have moved on since we last spoke at the last call, and we now have pretty good visibility, I'd say, until 2030, and we expect to firm that up over the next couple of weeks. Clearly something we'll come back to in the third quarter numbers and CMD. But I'd say next couple of years, we have this visibility on growth. On storage, no need for safe harboring. Tax credits are protected well through till 2030 and beyond. And this will continue to play a significant role in our growth in the US. And as you know, with very good, typically double digits returns. We think that the utilities will have to fulfill the capacity needs with storage in the near term, and so we're in a good position to capitalize on this with our robust pipeline. Finally, but not at all unimportant, we have limited impact from import duties and tariffs because, as you know, we have a mostly U.S.-based supply chain set up since 2022-2023. So we had issues back with laundry panels in that period. we redirected our supply chain basically into the US. So in terms of solar panels and trackers, inverters and all of that. So we really have mitigated significantly our supply chain risk from tariffs. And now with this, from these most recent sort of tariffs. So that's on the US. On slide six, we can talk about Europe. And here are a couple of points. First, European Commission is actively working promoting grid reforms, and looking also at industrial resilience and competitiveness. And I've had the opportunity to spend some time in Brussels talking to some of the key people there, and it's very clear the drive for energy security, competitiveness, and that comes through in this continued promotion and defense of grids and renewables. Two public consultations recently launched to address these challenges, aiming to ease bottlenecks, accelerate permitting processes, enhance cross-border planning. We've also seen the publication of the Net Zero Industry Act to boost competitiveness and the resilience across Europe. One of the measures in this act refers to having at least 30% of the renewable energy auctioned annually in each member state, meeting non-price criteria. And all of this designed to strengthen Europe's industrial base and economic security. Still on this point, And interesting to see the European Commission is also monitoring the actual implementation of a lot of the measures that they've defined over the last couple of years. So for an example, they launched infringement procedures against all member states except Denmark because most countries hadn't transposed the revised renewable energy directive by the deadline. So you've now seen the European Commission really putting pressure on the member states to actually transpose and get moving with a lot of the stuff that had been defined at the Brussels level. Regarding batteries in Europe, as you know, we've definitely seen a big push for batteries in the US. We've seen them in the UK. In Europe, we hadn't seen so far. What I'd say is that certainly now in 2025, we are seeing unprecedented daily price spreads. Now, these spreads... are a sustained increase in relation to the power prices. And we're seeing renewables putting a significant downward pressure on the central hours of the day, with solar driving prices sometimes to zero or even negative prices. And at the same time, we're seeing higher prices during the evening hours, driven typically by the marginal price of gas. So this is a great situation for assets with flexible capabilities and a strong signal for the energy arbitrage business case. We've been holding back from investments on batteries over the last couple of years. I think we believe that over the next month, years, there will be an increased focus on promoting batteries in several countries. And we've seen, for example, in Poland recently, and also we expect some auctions in Spain, that there will be further opportunities, for example, in batteries. Just as a sort of interesting data point, you can see there on the slide, capacity awarded 15 gigawatts expected in 2025 versus 13 gigawatts in 2024. So we're already talking about quite relevant numbers. So overall, you're taking important steps to have a more resilient and sustainable energy system. Slide seven, and I'll go quickly through the next couple of slides. So on slide seven, it's basically talking about our capacity expansion plans for 2025 and beyond, well, essentially 2026. We're on track for the two gigawatts, as I mentioned. Around 70% of that capacity is expected in the fourth quarter. The additions are progressing on time and on budget. So we have good line of sight to them. Looking to 2026, we have good visibility on up to one and a half gigawatts of capacity additions. Around 65% is already secured. And we have additional capacity under advanced negotiations with good opportunities in both US and Europe. So we're talking about megawatts that are really in the final, final stages. of negotiations. So we hope to give you some visibility on that soon. Secure projects, they're expected to deliver returns above our target risk return threshold. So around 270 basis points above WAC. And I think that just confirms the strength of our pipeline and also our capital allocation discipline. Overall, 85% of the 2026 pipeline is concentrated in the US and in Europe. And as I've said before, this really re-focusing our focus reinforcing our focus on our core markets. If you look at slide eight, asset rotations, again, I think here, relatively positive news. We're advancing this plan with around 0.7 billion of the targeted proceeds already signed or closed at good multiples. We had one transaction in Spain already closed, three more signed, including the transaction signed today in Greece, three additional deals that are currently under binding bids, and we expect those will come out over the next couple of weeks. The enterprise value per megawatt across these transactions, average values of around one and a half million euros per megawatt. So showing good, strong market demand. As you know, typically, I've talked about it's important to have demand and then it's important to have good prices. And I think we're seeing both of those processes with robust number of parties participating in the non-bindings and binding offers. So I think that's holding up quite well in 2025. Overall, we're expecting the 2025 transactions to generate around 100 million of gains, thereabouts. But half of the volume of the asset rotation will be executed at a 49% stake. And most of these proceeds are expected to be recognized in the second half of 2025, obviously. So you'll see that coming through and impacting the net debt also towards the end of the year. On slide nine, talking about investments. So we have been very disciplined on our investments. They're about 1.1 billion, around a 25% decrease versus the one and a half invested in 2024, but obviously also doing fewer megawatts this year versus last year. Despite the reduction, the investments are highly focused, as I mentioned earlier, at 90%, in this case, allocated to core markets in North America and Europe. And if we break this down by technologies, we have around a third of the investments going towards solar utility scale. Of that, 47% in the US, 38% in Europe, primarily Spain, Italy, and Germany. Then we have around 31% on wind onshore projects across the US, Europe, mostly Italy, Spain, and Greece, and then also some Brazil. 20% of the investment towards storage, mostly in the US, around 300 megawatts of storage capacity under construction. Around 9% for offshore wind, mostly the French projects, which are under advanced construction, and around 6% of just targeted solar DG with investments concentrated mostly in the US and in Singapore. So this investment profile really reflects our commitment to the core geographies, but also having a diversified technology portfolio, but of mature technologies. Let's talk about efficiency. And I think this is also one of the positives that we can really highlight here in this first half. So we're continuing our trend of improved operational efficiency. We'd already showed that in previous quarters, and I think this quarter is not an exception. We're delivering an 11% reduction in adjusted core OPEX per average megawatt. This is driven by essentially three things. One is just general cost discipline and very targeted efficiency measures and improving streamlined processes just across the organization. And I think the whole organization has responded very well towards this. We are, the second point is also a much leaner workforce model. So as I mentioned last year, we did a very deep internal reorganization aligned with our revised growth outlook, but also trying to really eliminate a lot of, well, any areas that could have either duplications or redundancies. And so we have a much leaner workforce model and we continue to work on that. And I think we still see some additional potential for efficiency. The third point is on the AI driven initiatives. as we go on optimizing operations and digitalizing a lot of the processes, we are also managing to just become more productive and get those economies of scale. In terms of headcount, so it's obviously optimized down to around 2,880 people. We are obviously ensuring we retain our top talent and best performance, and that's been a key driver for us and certainly a key priority for us. Overall, I think I just wanted to really highlight this commitment to operational excellence and cost efficiency and productivity, and making sure we stay competitive and agile in this fast-changing energy landscape. In terms of guidance, and just before I turn it over to Hui, so we are targeting, as I said, the 2 gigawatts for the full year. We had about 0.4 gigawatts in the first half, but I think I've already guided earlier in previous quarters that most of this would then be coming in the fourth quarter. The full year recurring EBITDA is expected to be around 1.9 billion, including the 0.1 billion in asset rotation gains, and having generation in the range of 41 to 43 terawatt hours. I think we're quite comfortable this year with this. Last year, I think we were a little bit off, but I'd say this year we've really gone deep on this topic of the volumes and feel much more confident. By mid-year, we've also already achieved a billion of asset rotations. Net debt projected to be about eight billion by year end, including two billion of asset rotation proceeds and a billion in tax equity proceeds. And so as of the first half, the net debt was at nine billion. But as I mentioned earlier, proceeds are expected to have come in mostly in the second half of the year. So we should see that convergence from the nine down to the eight billion of net debt. So overall, EDPR firmly on track to meet its 2025 guidance and very much supported by a very disciplined execution on both the investments and on the operational side. With that, I'd stop there and turn it over to Rui. Thank you.

Thank you very much, Miguel. Good afternoon. So let's move into the first half results and starting with page 13, really solid operational performance. So in the first six months, It was driven significantly by improving across all the generation metrics. So, salt capacity increased by 18% year-on-year, reaching 19.6 gigawatt, up from 16.6 gigawatt in the first half of 2024. So, this growth was supported by good contributions from North America, Brazil, Italy, and Spain. Asset rotation activities and decommissioning contributed to the portfolio as it ends by the end of June. So as of June 2025, 2.3 gigawatt of capacity is under construction for projects in 2025, but as well in 2026. Electricity generation rose by 12% year-on-year from 18.9 terawatt hours in the first half of 2024 to 21.2 terawatt hours in the first half of 2025. Operational efficiency has also improved, as Miguel highlighted, lower electricity losses and the renewable resource at 99%, just slightly below the 100% recorded in the first half of 24, with North America performing above average, helping to offset lower resource levels in Europe. So if we move now to slide 14, EDPR recorded a 2% year-on-year increase in electricity sales in the first half of 2025, driven by strong growth in generation, partially offset by lower average selling prices. The average realized selling price declined by 9% year-on-year, from about €60 per MWh to around €55 per MWh, but this was fully compensated by the 12% increase in clean power generation. This average price evolution was mainly due to Europe and South America, while North America saw a slight price increase from new projects in operation, as well as merchant exposure. So overall, a positive sales performance and showcasing the strength of our diversified portfolio. If we move now to slide 15, underlying recurring EBITDA increased by 159 million euros year-on-year, representing a 20% growth, excluding asset rotation gains, and a 1% year-on-year, excluding FX impacts. And this is driven by around 219 million euros of tax equity revenues from North America. That's an 18% increase in generation and new capacity additions that is driving this addition in revenues. 12 million of capital gains from the asset rotation closed in Spain as planned with the remaining gains concentrated in the second half of this year. Around 384 million core OPEX in line with last year's number. on the back of strong efforts in constant efficiency improvements, and about 50 million of less net other costs that improved around 60 million a year on the back of no material impacts this year from Colombia nor Romania versus last year additional costs. These results highlight the improvement in the underlying business from both operational growth as well as the enhanced efficiency. If we now go to slide 16, On the first half of this year, the financial results rose by 21 million year-on-year, reaching 244 million. This is primarily due to a 1.7 billion increase in nominal financial debt and also lower capitalized interest or financial expenses, and partially offset by effects in derivatives. A key strength of the financial structure is that 74% of EDPR's debt is at the fixed rate and therefore protecting against interest rate volatility. We also maintain a robust debt maturity profile with 57% of our debt mainly or effectively maturing beyond 2028. And of course, also this reinforced the long-term financial stability. And finally, our currency exposure remains well diversified, with 47% of debt in euro and 35% in US dollar. And therefore, we have a natural hedge against forex fluctuations. So on slide 17, and looking to the cash flow evolution, that I think is definitely a very positive one. In the first half of 25, organic cash flow reached 195 million euros, marking a 0.2 billion year-on-year increase. It's a solid performance of the operating portfolio, as well as changes in working capital and distributions to minority interests and tax equity partnerships. Just please note that organic cash flow excludes tax equity cash proceeds. These are typically received when the project is commissioned and have an immediate impact on net debt. So in the first half, we received 132 million of the tax equity cash proceeds, And we remain on track to reach 1 billion for the full year. And this is aiming, of course, we are aiming to have this cash in towards the end of the year. So as of June 2025, net debt stood at 9 billion. This is about 0.7 billion since December of last year. The increase is mainly driven by 1.3 billion in net expansion investments supporting our growth. This was partly offset by asset rotation proceeds, primarily from the transactions that were already closed, as I explained. Looking ahead, we expect net debt to converge to around 8 billion by year-end. Again, as Miguel said, timing of asset rotation proceeds, what I just mentioned about tax equity cash proceeds, which will be concentrated in the second half of the year. So if we now move to slide 18, so as mentioned earlier, our recurring underlying EBITDA rose by 159 million year-on-year, and this is reflected immediately into the net profit. Depreciation increased driven by the new capacity additions and the one-off impact from accelerated depreciation of repowering wind farm in US, something that we already explained in the first quarter. The effective tax rate normalized at 29%, slightly above the previous quarters. And this is because given the absence of tax benefits coming from asset rotation gains, effectively the tax rate is applied to the operational results from EBITDA. Minorities contributed positively year on year following the completion of the CDG minorities buyback in late 24. As you know, this is an important step in optimizing the portfolio and reinforcing the long-term value creation for all the shareholders. Regarding the one-off impacts at net profit level, just to mention there are about 30 million that we recognize this quarter. approximately 11 million coming from ocean winds in the US, given a contract or some contract cancellations that happened at South Coast Wind Project. And this relates to equipment supplier that were, the contract was canceled. And 15 million related to a portion of outdated equipment that we have in US and will not be using it in future projects. So all in all, recurring net profit reached 137 million, excluding capital gains. This represents a threefold increase versus last year. So really a very good performance on the underlying asset base. So now, Miguel, back to you for closing remarks. Thank you.